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The barbarians kicked down the gates and a flood of out-of-state investors propped up New Mexico's real estate market in 2006.

Demand for Albuquerque's commercial real estate was strong throughout the year, leading to rising land prices and rental rates for the key business addresses in the North I-25 and Uptown corridors. While demand for residential real estate peaked in July and has slid downhill ever since, the residential market still recorded its second best year ever in terms of the number of homes sold, observes Cathy Colvin, the president of the Albuquerque Metropolitan Board of Realtors.

West Coast transplants were partially responsible for both the market's surge and later fall off. The ardor of California's investors for Albuquerque's sprawling and relatively cheap landscape helped fuel both the commercial and residential markets in 2006. The year's biggest deal and the one that will likely have ramifications for the next several decades was the fight for control of Westland Development Co. and its 57,000 acres of mostly vacant land on Albuquerque's west side.

Westland's bitter proxy battle pitted shareholders -- who had inherited their stakes from the historic Atrisco land grant dating to the 1700s -- against Westland's board members, who will became millionaires when the sale closes. It was part "Barbarians at the Gate," part "Milagro Beanfield War," but when the proxies were tallied in late November, Irvine, Calif.'s SunCal Cos. ended up gaining control with the acceptance of its $250 million offer. SunCal will spend 2007 planning a massive mixed-use development and will likely sell off pieces to both residential and commercial developers.

The deal was historic not just because of its size, but because it will lead to the development of Albuquerque's last large piece of vacant land with several thousand homes and new office and retail developments. Their scale will be determined partially through planning sessions with Westside business and homeowners, says Will Steadman, an Albuquerque native who heads SunCal's offices in New Mexico.

Gov. Bill Richardson said the deal was important because it finally clarifies the future of Westland's holdings and will have a significant impact on Albuquerque. SunCal's commitment to "smart development" is also a plus for the region, he said.

South of Albuquerque, it was again California money pulling off the biggest real estate coup. Belen's city council annexed 6,000 acres in December and San Francisco's Coast Range Investments acquired the property. Coast Range plans to use the land to build Rancho Cielo, a phased development that could eventually include between 11,000 and 15,000 homes, quadrupling the size of Belen.

Jim Wood, Coast Range's vice president, estimated the project's residential value alone at between $1.6 billion and $2.2 billion. Water rights make the project contentious, but the developers say they have obtained water rights for 5,500 homes so far. The first phase is planned conservatively, with 1,000 homes and an industrial park that could start construction in 2007, while the second phase would contain 5,000 homes.

When completely built out, Rancho Cielo will include shops, a hotel, 11 parks and eight schools.

As far as commercial office development and leasing went, the market advanced throughout the year with several new Albuquerque projects attracting attention statewide. The 87,000-square-foot Jefferson Green building at Journal Center, developed by R. Davis Cos., was awarded the best new large office project award by the National Association of Industrial and Office Properties for 2006, partially because of its environmentally-friendly features.

The best new retail project, according to NAIOP, was Hunt Building Corp's ABQ Uptown, the 220,000-square-foot lifestyle center that brought new upscale retailers such as Coldwater Creek, Pottery Barn and Apple to the Duke City. The center attracted huge crowds during the holiday shopping season and will have a second, residential phase that breaks ground in 2007.

North of Albuquerque, the state's most expensive office project, Thornburg Mortgage and Thornburg Investments' new corporate campus in northwest Santa Fe, got the green light from New Mexico's Supreme Court after eight lawsuits that sought to stop its construction. Ground will be broken in February on a $40 million, 100,000-square-foot campus to house Thornburg's 300 current employees. The three interconnecting buildings were designed by world class architect Ricardo Legoretta and Thornburg hopes they can achieve a gold certification for sustainability standards.

The residential landscape ends the year on a sour note with declining sales and home prices stagnating after several boom years. Home sales peaked in July and by December were declining by more than 15 percent from their levels a year before. The state had been resilient to the nation's housing problems, but when Californians couldn't sell their homes it shut off a major source of capital that had been fueling the state's housing growth. By the third quarter, New Mexico's delinquency and foreclosure rates were among the highest in the mountain states, according to the Mortgage Bankers Association. Only Colorado had higher foreclosure rates in the eight Rocky Mountain region states and once gung-ho builders were slowing their projects and offering incentives to induce homebuyers to purchase already-built product.

Interest rates remain near their historic lows. Now the question is whether Albuquerque's continued job growth will be enough to prevent its housing bubble from popping or at least keep it to a slow fizzle before reinflating.

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